Best Large Cities to Start a Business

John S Kiernan, Managing Editor • May 6, 2019

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John S Kiernan, Managing EditorMay 6, 2019

Americans are born with an entrepreneurial streak. It’s in our DNA. From the Gold Rush to the Industrial Revolution to the Internet Age, intense periods of innovation have molded our economy and sparked important societal advancements.

Today, more than 15.3 million people in the U.S., or nearly 10 percent of the labor force, work for themselves. And there is always room in the market for new ideas, products, services and multi-million-dollar success stories — if one knows where to look.

In order to help aspiring entrepreneurs — from restaurant owners to high-tech movers and shakers — maximize their chances for long-term prosperity, WalletHub compared the relative startup opportunities that exist in 100 U.S. cities. We did so using 19 key metrics, ranging from five-year business-survival rate to office-space affordability. Check out our findings, additional expert commentary and a detailed methodology below.

Ask the Experts

As current self-employment figures have shown, an increasing number of Americans aim to become their own boss. To assist them in that goal, WalletHub asked a panel of entrepreneurship experts to share their thoughts on the following key questions:

What tips would you offer an aspiring entrepreneur?

Which are some of the biggest mistakes entrepreneurs make?

Besides technology, what other sector is ripe for disruption by entrepreneurs? What is the next big thing?

What are the advantages and disadvantages of starting a business in a big city?

What is the best source of funding for new companies?

What is the most effective way state and local authorities can stimulate entrepreneurship and new business development?

Methodology

In order to determine the best cities for launching a business, WalletHub compared 100 cities, across three key dimensions: 1) Business Environment, 2) Access to Resources and 3) Business Costs. Our sample considers only the city proper in each case, excluding cities in the surrounding metro area.

We evaluated the three dimensions using 19 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for startups. Data for metrics marked with an asterisk (*) were available at only the state level.

We then determined each city’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order our sample.

Business Environment – Total Points: 50

Length of Average Work Week (in Hours): Full Weight (~6.25 Points)

Average Growth in Number of Small Businesses: Full Weight (~6.25 Points)

Startups per Capita: Full Weight (~6.25 Points)

Average Growth of Business Revenues: Full Weight (~6.25 Points)

Five-Year Business-Survival Rate*: Full Weight (~6.25 Points)

Industry Variety: Full Weight (~6.25 Points)

Entrepreneurship Index*: Full Weight (~6.25 Points)

Job Growth (2017 vs. 2013): Full Weight (~6.25 Points)

Access to Resources – Total Points: 25

Financing Accessibility: Full Weight (~3.57 Points)Note: This metric was calculated as follows: Total Annual Value of Small-Business Loans / Total Number of Small Businesses.

Venture Investment (amount) per Capita: Full Weight (~3.57 Points)

Prevalence of Investors: Full Weight (~3.57 Points)

Human-Capital Availability: Full Weight (~3.57 Points)This metric was calculated as follows: Number of Job Openings per Number of Civilians in Labor Force minus Unemployment Rate.

Higher-Education Assets: Full Weight (~3.57 Points)Note: This metric is based on WalletHub’s “2019 College & University Rankings” ranking of America’s top 951 universities.

Share of College-Educated Population: Full Weight (~3.57 Points)Note: This metric measures the percentage of the population aged 25 and older holding at least a bachelor’s degree.

Working-Age Population Growth: Full Weight (~3.57 Points)Note: “Working-Age Population” includes individuals aged 16 to 64 years.

Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Bureau of Labor Statistics, Ewing Marion Kauffman Foundation, National Venture Capital Association, Yelp, Indeed.com, Tax Foundation, Council for Community and Economic Research, LoopNet, Federal Deposit Insurance Corporation and WalletHub research.

Image: Karramba Production / Shutterstock.com

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